TAXATION WITHOUT COMPENSATION

The federal government taxes a penny saved and a
penny earned. It takes a bite out of vices like gambling
and virtues like marriage.

Delaware judges are leery of the prospect that the
feds even want to tax good intentions.

It is the sort of strange and unintended consequence
that can crop up when the state tries to do what it is
supposed to do -- simultaneously balance its brutalized
budget and uphold its constitution. Who knew?

The state has 56 judges. They are not rich by
hedge-fund standards, although they are by the
unemployment line. Their annual paychecks range from
$194,850 for Chief Justice Myron Steele to $121,750 for
Chief Magistrate Alan Davis. Most judges are paid
$168,850 a year.

There is more to judicial pay than mere money. Like
tea and taxation without representation, judges'
salaries had a part to play in the Revolution. Set by
royal whim, they were hardly the stuff of an independent
judiciary. It was one of the grievances in the
Declaration of Independence.

It was also the reason a prohibition on cutting
judges' salaries was written into the U.S. Constitution,
as well as Delaware's, where the provision remains to
this day. Mostly it draws about as much attention as the
constitutional clause against bestowing titles of
nobility.

Not anymore. The judges have been forced to be keenly
aware of it, once Gov. Jack Markell proposed slashing
state workers' pay by 8 percent as part of the dire
efforts to balance the budget during this Great
Recession.

The judges declared themselves unwilling to keep
their paychecks amid universal sacrifice. "I can't find
a single judge who does not think it unconscionable,"
Chief Justice Steele said.

The solution seemed obvious. Volunteer for a lesser
payday. It would preserve the state constitution and
render a savings of about $600,000 to the budget, if the
cut of 8 percent stands.

Being the judges they are, they next read the fine
print in the tax code. Uh-oh.

It seems the Internal Revenue Service does not care
if the judges voluntarily return a percentage of their
salaries to the state. They would be taxed as if they
pocketed all of it.

No good deed goes unpunished, as the saying goes.

"It's one thing to say we'll give up what the state
employees give up, but it seems like a double whammy,
which seems unfair," Steele said.

The judges are researching whether there is a way for
them to avoid the tax liability on otherwise phantom
income. If not, they are considering another approach.

They would make a comparable contribution to the
Delaware Bar Foundation, a charity administered by the
bench and bar. One of its purposes is to provide legal
representation to the poor in civil cases. The state,
which also allots money for indigent legal aid, would
reduce its budget line by the amount of the judges'
donation.

The state still would get its savings, the legal help
still would be available, and the judges would get a
charitable tax deduction instead of a tax liability on
pay they did not take.

The judges are not alone in bumping against the
constitution. It also protects the governor's pay.

Like the judges, Markell has decided to take a
voluntary hit on his paycheck, which is $171,000 a year.
He plans to write the state a check for 10 percent of
what he collected in this fiscal year when it ends June
30, and to dock himself 20 percent, writing a check
every month, in the next fiscal year.

Markell is not bothering to consider the tax
implications. It is probably just as well.

Before he went into politics, Markell was there for
the dawning of the telecommunications era and moved on
up from his Newark roots to Chateau Country. He did so
well that he routinely loans his campaigns in the
neighborhood of three-quarters of a million dollars,
although he has not had to spend it because of his
fund-raising prowess.

The last time the state had this little sympathy for
a governor's wallet, it had one named du Pont.